Presentation is loading. Please wait.

Presentation is loading. Please wait.

California Real Estate Principles, 10.1 Edition

Similar presentations


Presentation on theme: "California Real Estate Principles, 10.1 Edition"— Presentation transcript:

1 California Real Estate Principles, 10.1 Edition
Chapter 5 Real Estate Contracts

2 Chapter 5 Discuss types of contracts and list the legal requirements for an enforceable contract. Distinguish between the Statute of Frauds and Statute of Limitations. Describe how contracts are terminated or discharged. Explain the purpose and types of listing agreement. Explain the purpose and main provisions of a purchase contract. Describe when a counter offer form is used. Discuss the purpose of an option contract. Describe the major mandated disclosures required in a real estate transaction.

3 CONTRACT An enforceable agreement between two or more legally competent persons. A promise or mutual promise to do or not do specified acts. For consideration Money Services Forbearance Legal object “Honor Thy Contract”

4 TYPES OF CONTRACTS OR OR OR EXPRESS Written or Oral
IMPLIED Acts of Parties OR BILATERAL Both Parties Obligated UNILATERAL One Party Obligated OR EXECUTORY Yet to be Performed More action required EXECUTED Fully Performed Contract complete OR

5 VOID VOIDABLE UNENFORCEABLE VALID
No Contract No legal effect Courts won’t consider a contract Lacking something: Capacity or Mutual Consent or Lawful Object VOIDABLE Able to be Enforced or Voided only by the Injured Party; Other side can’t cancel Lack of Capacity, Fraud, Undue Influence, Duress, Menace UNENFORCEABLE Not able to be enforced Was not put in writing Property does not Exist Statute of Limitations has run out VALID Fully Enforceable A binding contract All Essentials Included No Negative Influences

6 ESSENTIAL ELEMENTS OF A VALID CONTRACT
Capable parties (Emancipated minor or Age 18+) Mutual Consent (Offer and Acceptance) Lawful Object (Cannot break law) 4. Sufficient Consideration (Anything of value) -Money -Goods -Promises -Services 5. Must be in writing to be enforceable by a court of law as stipulated by the Statute of Frauds

7 BREACH OF CONTRACT Anticipation of/or actual legal action constituting default remedies Legal Remedies: Actual Damages Liquidated Damages Equitable Remedies Specific Performance Rescission

8 TERMINATION OF CONTRACT- How Contracts Can End--
Mutual Agreement Destruction of the property Written release Substitution -- Novation Rejection of Contract Impossibility of performance Incapacity of Either Party Completed Performance

9 STATUTE OF LIMITATIONS
Provides deadline for filing a court action Examples: Must file within: 1 Year Against Bank for Forged Check 2 Years Oral Contract Title Insurance Matter 3 Years Trespass Fraud or Mistake (3 years from discovery) 4 Years Written Contract 10 Years Judgment

10 RESIDENTIAL LISTING AGREEMENTS
A contract between the Principal (Seller) and Agent (Broker) that: Authorizes agent to find buyer or tenant Establishes the commission (Note: Commissions are negotiable) Lists the delegated powers to broker, as agent terms and conditions that the seller will sell amount of the broker’s commission and when earned has a definite termination date

11 Open listing Owner has contract with several agents
Commission paid only to lst agent with acceptable offer Owner may sell property without a commission No definite termination date required

12 Exclusive Agency Listing
Only one agent is employed to represent the principal (seller) Listing broker may share commission with subagent who finds a buyer Seller reserves the right to sell the property without paying a commission Must contain a definite termination date

13 Exclusive Right-to-Sell
Only one agent is employed to represent the principal (seller) Commission to agent regardless of who sells the property Owner liable for commission if owner withdraws or makes unmarketable MUST have a definite termination date Cooperating agents are often used via MLS Most common agency used in the industry

14 Net Listing Can be an open or an exclusive listing
Seller and broker agree seller is to receive a fixed amount Broker earns everything over the net amount guaranteed to the seller Broker must reveal the exact selling price to buyer and seller before closing and the amount of commission earned Not frequently used in the industry

15 MULTIPLE LISTING SERVICE (MLS)
A real estate organization. Pools agent listings with other agents. Shares market information on property features, price, terms of sale, availability. Written contract with membership rules. Commission split for cooperating broker. Usually a computerized database of information. Increases market exposure. Owner must five written permission to submit their property on the MLS. Controlled by local association members

16 THE REAL ESTATE PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
Commonly called the deposit receipt An agreement between principal and agent B. Functions of a Deposit Receipt: 1. Serves as a receipt of funds broker received 2. May create a binding purchase contract 3. Requires agency confirmation 4. Reaffirms commission 5. Requires good faith consideration 6. Party must receive a copy of what they sign at the time they sign it.

17 Other important features:
1. An enforceable legal contract 2. Buyer’s offer to purchase 3. Buyer may withdraw the offer any time before seller’s acceptance communicated back to buyer. 4. Lists all terms and conditions (CLAP) 5. Specifies the time: A. Time buyer may disapprove B. Disclosure defects prior to contract 6. Agent must submit all offers after received

18 THE DEPOSIT RECEIPT (Important Features)
ash oans greements ossession And Disclosure L A P

19 THE NEGOTIATING PROCESS
When buyer (offeror) makes an offer, the offer may Be withdrawn Expire Be changed Be accepted The seller (offeree) may Accept Reject Counter When seller counters, the buyer may Counter the counter ARC

20 THE PURCHASE AGREEMENT
Steps to Bind the Parties: O Offer Acceptance C A Communication of acceptance

21 COUNTER OFFER When the Seller changes terms of buyer’s offer in ANY WAY. Counter REJECTS the original offer. If buyer accepts the counter, this must be communicated in writing to the seller.

22 Other Contracts: Option: Right to buy in the future. Optionee = buyer
Optionor = seller Exchange contract 1031 IRC (Internal Revenue Code) Trade one property for another under specific tax guidelines allowable by statute.


Download ppt "California Real Estate Principles, 10.1 Edition"

Similar presentations


Ads by Google